What Is Benchmarking?

Process benchmarking is an activity done with the objective of comparing the processes of an organization to:

  1. Processes of leading organizations in the same industry
  2. Processes of leading organizations in a different industry or
  3. Best practice processes, due to their superior performance and wide acceptance.

Benchmarking offers a simplified way for a business to review its business operations by studying what leading organizations are doing and addressing the gap(s) between its current processes and best practice processes. For example, a company may compare its manufacturing process to another company’s to identify the difference in performance of both companies and the factors responsible for the difference.

While strategic benchmarking is directed at fulfilling the objectives of the business, competitive benchmarking is aimed at studying industry practices with the aim of achieving competitive advantage in the market by assessing competitors’ processes. It requires an expert (usually an analyst or a consultant) that is skilled in executing the following steps:

  1. Identifying the problem areas/processes in the business that are to be benchmarked. This is necessary to define the scope of work.
  2. Prioritising the processes that need to be benchmarked.
  3. Identifying industries or companies that have products similar to what you have in your industry and identifying the industry leaders, that is, which companies stand out the most?
  4. Conducting research on the best practice to be adopted.
  5. Identifying the leading edge practices which clearly stand out as exceptional and can be implemented in your organization and 
  6. Planning for improvements.

Benchmarking should be done by experienced professionals with the ability to analyse competitors' data and industry trends. Though effective in helping businesses improve their operational performance, it is criticised for its limited emphasis on innovation.